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As a high-growth-oriented company, Tencent is charting a very ambitious path to grow its revenue over time.
Chinese multinational tech giant Tencent Holdings Ltd (HKG: 0700) has released its fourth-quarter earnings report in which it showed a better-than-expected online ad revenue. According to the firm’s report, its overall revenue for the fourth quarter came in at 144.95 billion yuan ($21.07 billion), a figure higher than the 143.89 billion yuan estimated by FactSet.
The online ad revenue was also very impressive, growing by 15% to 24.7 billion yuan, beating a FactSet estimate of 22.18 billion yuan. The figures formed a new milestone for the company whose ad revenue grew for the first time since the second quarter of 2021 when the coronavirus pandemic was still raging hot.
The Tencent tech ecosystem was all-inclusive in revenue generation within the time under review. Per the company, in-feed ads for video accounts raked in more than 1 billion yuan in revenue for the fourth quarter. Despite the integral nature of WeChat Moments, Tencent said users spent more time on Video accounts 1.2 times more than the former.
“This advertising unit allowed them to unlock revenue coming from e-commerce, which has done pretty well,” James Lee, U.S. and China internet analyst at Mizuho Securities. Lee has a moderately ambitious price target of 400 yuan on Tencent stock.
The adoption of Tencent’s social media platforms remains one of its core basis for projected future growth. According to data shared, WeChat users in China and around the globe topped 3.5% for the fourth quarter and are pegged at 1.31 billion accounts.
The company’s platform serves as a viable outlet for advertisers to market their products and per the firm, it recorded trillions of yuan in Gross Merchandize Value (GMV) from its mini-programs. The mini-programs allow users to buy products from merchants within the app.
Tencent Revenue and Future Prospects
As a high-growth-oriented company, Tencent is charting a very ambitious path to grow its revenue over time. At the moment, the company revealed that the revenue from ads represents just about one-fifth of its total revenue base.
The bulk of its revenue comes from its gaming platform. This segment has picked up since the hiatus on the release of new titles due to regulatory hurdles that have now been lifted by the government. Besides gaming comes fintech services which accounted for 47.2 billion yuan of its revenue, below FactSet estimates of 49.49 billion yuan.
“FinTech Services revenue growth was slower than the previous quarter due to COVID-19 outbreaks temporarily suppressing payment activity,” Tencent said in a release. “Business Services revenues decreased year-on-year as we scaled back loss-making activities.”
For Tencent, more attention will be paid to its proven growth areas while the company said it will also keep working on an Artificial Intelligence (AI) tool like ChatGPT in the near future.
Following its performance report, Tencent shares are up by 8.18% to 375.60 yuan.